No. 3: Ventas emerging as an aggressive acquirer

Amid a squeeze on costs and an uncertain regulatory future, the health care landscape has been consumed by takeover fever in the past year, with Chicago-based Ventas Inc. emerging as one of the most aggressive acquirers.

A real estate investment trust, Ventas doubled its network of senior-living facilities and medical office buildings with the July 1 acquisition of Nationwide Health Properties Inc. of Newport Beach, Calif., for $7.6 billion.

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But Ventas wasn't done: Later in the year, it landed 117 senior-living facilities managed by Louisville, Ky.-based Atria Senior Living Inc. for $3.1 billion. Then, in December, Ventas announced it was in a deal to buy Cogdell Spencer Inc. of Charlotte, N.C., for $760 million.

Indeed, the Nationwide deal was immediately accretive to earnings, prompting management to raise the forecast for full-year 2011 funds from operations by about 5 percent to $3.34 to $3.36 per share, up from $3.17 to $3.23. With Nationwide's network of West Coast facilities added to its portfolio, Ventas is now the largest U.S. owner of senior housing and assisted-living facilities, with more than 1,300 properties in 47 states.

David Aubuchon, an analyst at Robert W. Baird & Co. in Milwaukee, worries that some of the senior-care acquisitions have become expensive, with first-year returns, or capitalization rates, falling between 5 percent and 7 percent. He reckons that the Ventas/Nationwide combination will yield less than 6 percent.

“In a world with low interest rates, the cost of capital for health care REITs like Ventas has gone down dramatically, both on the debt and equity side,” he observes. “That's how these deals make sense.”

Ventas is investing into a demographic sweet spot. The Census Bureau projects that the U.S. elderly population will grow by more than one-third to 54.8 million by 2020; in the same period, the U.S. nursing home population, those age 85 and older, is expected to rise 15 percent to 6.6 million.